The World Bank recently projected global economic growth to be a dismal 2.5 percent this year, with a paltry 1.4 percent in high income countries and a 0.2 percent decline in the eurozone. Anemic economic growth will not abate until debt relative to income declines.

Global macroeconomic environment remains highly leveraged, where total debt (private and public) relative to GDP is still unacceptably high. A sustainable level of total debt/GDP is roughly 150 percent – 200 percent.

During the US depression, this figure reached 260 percent. By 2008, it was over 350 percent. According to the Bank for International Settlements, total debt/GDP in the advanced economies grew from 167 percent in 1980 to 314 percent today. Further debt reduction is essential to improve the global economy.

The World Bank indicates that China contributes nearly one third of the global economic growth. A slowdown in China would not bode well for the world economy.

Recently, HSBC Holdings PLC reported a decline in manufacturing activity in China for seven consecutive months (the eurozone has experienced a decline each month for nearly one year). In addition, fixed-asset investment is at 2001 levels while electricity generation is growing slowly, an annual rate of 3.5 percent in May from a year earlier and 1.5 percent in April from the previous year, The Wall Street Journal reported.

Skepticism abounds regarding the accuracy of economic data reported by Chinese officials. An American diplomatic cable indicated that the Vice-Premier of China, Li Keqiang, regarded the broad measures of China’s economic growth as “unreliable” as far back as 2007, according to WikiLeaks. Some fear the real growth rate in China may be much less than what is officially reported.

Given these data in aggregate, the future portends poorly for global economic growth. Sustainable, long term prosperity is years away and predicated on a decline in debt relative to income.